Why Cimarex Energy Co Shares Could Pop Another 25%

Does this analyst make a good case? Or is it just more noise from Wall Street?

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

So what: Along with the upgrade, analyst Mike Kelly boosted his price target to $175 (from $116), representing about 25% worth of upside to yesterday's close. So while contrarian traders might be turned off by Cimarex's price strength over the past month, Kelly's call could reflect a sense on Wall Street that its production growth prospects still aren't fully baked into the valuation.

Now what: According to Global Hunter, Cimarex's risk/reward trade-off remains particularly attractive. "We're confident that XEC's recent boost to its underlying growth rate isn't a fluke," said Kelly. "In fact, we now expect further acceleration in 2015 (+24% growth in 2015 vs. +20% in 2014). Recent notable improvements in individual well recoveries across the company's Permian & Mid-continent acreage positions stemming from revised completion techniques (XEC is now implementing larger fracs with more stages/higher fluid & sand volumes) are also a big driver of our increased NAV value." When you couple that upbeat outlook with Cimarex's industry-topping margins, it's tough to disagree with Global Hunter's bullishness.